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Fall May Offer Great Time to Buy Real Estate with Buyers Advantages - 2007-09-29 |
Most of us applauded the decision of the Federal Reserve to lower short term interest rates recently. It represented not only a shot in the arm to consumers, but also may have heralded one of the best opportunities for home buyers to make a smart purchasing decision this year.
Overall home sales are down substantially when compared to last year, and new home sales have been hit particularly hard. Here are some reasons that potential buyers might want to get off the fence and make a decision now:
* Long term rates are low today, and that might not last.
By historical standards, today’s long term interest rate is a bargain, and we can’t know what will happen to rates in the future. Even so, it’s unlikely that rates will get much lower than they are now, and they certainly have room to increase if our economy gains momentum.
The greatest expenditure for most buyers in the purchase of their home is not the purchase price. In fact, it is interest expense. So the interest rate has a direct and important impact on the overall housing expense that most of us incur. Locking in a low rate now might be a smart move.
As an example, let’s consider a typical purchase of a home that sells for $250,000. You decide to get the lowest interest rate possible, so you make a cash down payment of twenty percent of the purchase price - an amount considered large by current standards. After your $50,000 down payment, you are approved for a thirty year fixed rate loan at, let’s say, seven percent.
Your monthly principal and interest payment works out to exactly $1330.60 per month for 360 consecutive monthly payments. And if you simply multiply the monthly payment by the total number of payments required, you end up with the total of all payments made - that’s just over $479,000.
Next you subtract the original amount you borrowed - it was $200,000 - and you are left with an interest expense of over $279,000, a carrying cost that actually exceeds the amount originally borrowed. Higher interest rates increase that carrying cost significantly.
* Sellers of resale homes are motivated now.
With a record number of resale homes on the market, there are bound to be sellers who have tried and tried to sell their home, but have finally decided that the market simply will not bear their asking price at this time.
Those sellers have two choices. They can take their homes off the market and try again later, or they can lower their asking price to a level that will, in fact, attract buyers in the current market climate.
Leaving your home on the market month after month with little or no sales activity is a painful and unproductive tactic. And with the traditionally slower winter season just ahead, the current market demands realism from sellers who would see a sale sooner rather than later.
* Builders of new homes are offering extraordinary deals.
New home builders are suffering from the decline in sales just like everyone else, and they are combating the slump in a variety of ways. Each of those ways is designed to attract you.
Free upgrades, free basements, free closing costs, and loan buy-downs are among the incentives that builders are casting about like prizes in a box of Cracker Jacks.
In some cases, builders are still paying extremely high construction interest rates on their unsold inventory, and as time goes on, that can spell disaster. It may be worthwhile even to suffer a loss on the deal rather than face the prospect of losing the house to the lender in foreclosure.
According to Atlanta home builders, the metro area currently has an inventory of about ten months worth of new homes. That seems like a lot.
But that figure has been declining in recent months, and an inventory of six months worth of new homes is considered equilibrium. In other words, when inventory is at six months, there is a good balance between buyers and sellers. When that happens, the incentives we are seeing in this market will disappear.
* Home ownership builds wealth.
I’m cheating here a little bit, because this benefit of owning real estate is not exclusive to this market. But I believe it to be a reality, especially today, and here’s why.
Our society, more than ever, is a consumption-based one. We want what we want, and we want it now. And society tells us over and over that it’s OK to go into debt to get whatever it is.
Owning your own home is one of the very few expenditures you can make that has, historically, led to wealth creation. In fact, for most Americans, owning their own home has turned out to be one of the best investments they ever make.
At the very least, buying a house to live in and financing it with a low interest fixed-rate loan will almost always turn out to be a forced savings plan over a period of years, and it will probably be a much better experience than that.
The bottom line here is that there are compelling reasons to take another close look at the residential real estate market in metro Atlanta. If you wait too long, you may find yourself sitting on the fence long after your advantage has disappeared.
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John Adams Presents
LANDLORD SURVIVAL TRAINING
with John Adams
Tuesday, February 28th
Being a landlord can be a rewarding experience. It can also be a difficult one if you don't have the knowledge and understanding of what the process requires.
Few schools offer degrees in property management, so most landlords learn "on-the-job" through acquired knowledge and on-the-job experience, essentially re-inventing the wheel. This is an expensive and depressing way to learn anything.
Whether you're a full-time landlord or just getting ready to purchase your first rental property, whether you are a licensed Georgia real estate professional or an accidental landlord, this seminar will help you improve your property's value, increase your cash flow and decrease your expenses, from attracting (and retaining) good tenants to maintaining your property to understanding your rights and obligations under the law.
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PROPERTY TAX REDUCTION WORKSHOP
with John Adams
Tuesday, March 27th
One of the significant annual expenses faced by any Georgia property owner is ad valorem property tax. Depending on where you live, it can be as high as three percent of the property's fair market value, and it must be paid year after year after year.
As a result, efforts to minimize this expense are not only worthwhile, they are encouraged by Georgia law. The phrase "ad valorem" means that each property is taxed based only on its value, and no one is required to pay a penny more than the minimum the law demands.
At the Property Tax Reduction Workshop, real estate expert John Adams will review the system he has used for over thirty years to reduce valuations and assessments in Georgia counties and municipalities, saving himself literally hundreds of thousands of dollars over the years.
In this 3 hour information packed seminar, John will teach you how to:
1. Understand the legal process of Property Tax Assessment
2. Meet the newly uniform Tax Deadlines
3. File your own Property Tax Return with a realistic valuation
4. Document your PT-50R with facts to support your case
5. Proactively meet with your Appraiser to reach an agreement
6. Protest your Notice of Assessment in an Intelligent manner
7. Give the Assessor an Opportunity to Save Face
8. Appeal to your Board of Equalization, in person or by mail
9. Make Your Case to the BOE
10. Take Your Case to Superior Court if necessary
If you are not doing all these steps now, you are likely costing yourself hundreds or thousands of dollars a year. If you own just one house, you could easily save over a thousand dollars over the next three years. If you own properties valued collectively over a million dollars, you are literally throwing away your profits year after year.
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